S3E12 Dave Wolcott How to reduce taxes by 100% through private equity investing

S3E12 – Dave Wolcott – How to reduce taxes by 100% through private equity investing
Dave Wolcott – How to reduce taxes by 100% through private equity investing. My next guest started his career by serving the US as a Captain in the Marine Corps. In 2000 he and his wife brought triplets into the world which inspired him to challenge traditional financial planning advice. Today, he is an author, podcast host, and the Founder and CEO of Pantheon Investments, a private equity firm that helps investors create passive income and save money on taxes through investments in real estate and alternative assets. Please welcome Dave Wolcott.

Payback Time Podcast

Payback Time is a podcast for investors. The goal of this podcast is to help make investing approachable and easy to understand. We will interview beginner and experienced investors and ask them to share stories on how they got started, what challenges they faced, what mistakes they made, and what strategy works for them today. The overall objective is to provide you with a roadmap that helps you become a better investor.

Key Timecodes

  • (00:46) – Show intro and background history.
  • (02:02) – Deeper into his background and business model
  • (06:10) – Understanding his oil and gas investment model
  • (07:24) – The expected returns of this oil and gas fund
  • (08:14) – What is the minimum investment to get into this business model? 
  • (08:33) – What other types of assets does he invest in to diversify
  • (12:45) – Deeper into his investing strategies
  • (14:24) – Understanding his philosophy considering Maslow’s hierarchy of needs
  • (16:20) – More about the returns at his model
  • (17:16) – A bit about his real estate strategies
  • (18:44) – The importance of creating a residual recurrent cash flow
  • (22:50) – Where are his properties located?
  • (23:58) – What classes of real estate does he invest in
  • (26:17) – What are his thoughts about risk
  • (28:07) – How big is his team
  • (30:01) – The importance of having a positive mindset to succeed as an investor or entrepreneur
  • (32:39) – His thoughts on a big mistake he made
  • (33:59) – A key takeaway that the audience can apply today
  • (40:00) – The worst advice he ever received
  • (40:16) – The best advice he ever received
  • (41:24) – Guest contacts


[00:00:01.900] – Intro
Hey, this is Sean Tepper, the host of Payback Time, an approachable and transparent podcast on business investing in finance. I like to bring our guests to hear authentic stories while giving you actionable takeaways you can use today. Let’s go. My next guest started his career by serving the US as a captain in the Marine Corps. In 2000, he and his wife brought triplets into the world, which inspired him to challenge traditional financial planning advice. Today, he’s an author, podcast host, and founder and CEO of Pantheon Investments, a private equity firm that helps investors create passive income and save money on taxes through investments in real estate and alternative assets. Please welcome Dave Walcott. Dave, welcome to the show.
[00:00:47.740] – Dave
Hey, Sean. Grateful to be here to connect with you and your audience.
[00:00:51.560] – Sean
Thanks for taking the time to join me. So why don’t you kick us off and tell us about your background? Yeah, sure.
[00:00:56.480] – Dave
So probably like a lot of your listeners, I grew up in a middle class family and was following the footsteps of go to school, get good grades, then get a good job. And that was really the recipe for success. So followed down that path of conventional wisdom. I got into the Marine Corps, did the ROTC program after school, and had the opportunity to serve my country. And that was just such a phenomenal experience. And I really got to learn some things that they don’t teach anywhere else in life. Things such as integrity, leadership, teamwork, some really valuable skills that I learned there and then transitioned into corporate America, got into the tech industry. And quickly thereafter, I was really dismayed, Sean. I just lost that sense of purpose, that sense of mission. Everything was about quarterly numbers and results and all these things instead of having purpose. And then on October 24, 2000, my wife and I had a little 18 month running around. And then we actually hit the baby lottery and had triple ts. So we literally quadrupled the size of our family. And so one of the first things I did was actually go and see my financial planner, as you can imagine, to say, Wow, the goal post literally just got moved a mile down the field.
[00:02:25.260] – Dave
How am I going to figure this out? So I sat down with my planner and he told me what all the ones before that had been telling me, which is, Oh, just put your money in the market. It’s going to go up, it’s going to go down. But 401 is your best. You can defer taxes. You’ll average 7 % over a long term long haul, and that’s a good investment. So I at that point became just super frustrated. And I think it was really the entrepreneur in me that just started asking a lot of questions. And I said, you know what? The top 1 % are not building their wealth as a retail investor in the market. There’s got to be some other things that I could do. So this really put me on this obsessive quest to really figure out how the top 1 % are building their wealth. And so I started investing in alternative assets, everything from oil and gas to commercial real estate, raw land, retail, office parks, multifamily, you name it. I also built a tech consulting business and built that and learned a lot about taxes and growing businesses and things like that.
[00:03:39.180] – Dave
And so fast forward today, and the Holistic Wealth Strategy is the book that I put together and the strategy is really a roadmap for people because I wanted to really share with people how can you really accelerate your wealth journey and create this freedom of money, this freedom of purpose, this freedom of time and relationship, that’s going to really put you on this path of living an awesome life.
[00:04:08.410] – Sean
Nice. Yeah. Thank you for your background there. Let’s work on the timeline a little bit here. So you understand or you realize that moment you’re having triplets, and I’m assuming you put together this plan pretty quick. It sounds like that, hey, this corporate job isn’t working. I got to accelerate my wealth here and put together the plan. Is that correct?
[00:04:31.420] – Dave
Yeah, that’s correct. I was doing well, but it wasn’t really moving the needle. I was looking for 10 X. I was looking for exponential growth.
[00:04:41.200] – Sean
Yeah. So you invested in, I was going through the list here in my head, oil and gas, multifamily real estate. And eventually, what led you to make the decision to start your own business? Because it sounds like your business today is it focused on real estate?
[00:04:58.240] – Dave
We do a lot of commercial real estate. And I can talk about really my investment thesis that we have. But one of the things that I found really interesting was that as you look at the world of investing, I think the equities markets are very one dimensional in nature. Because if you buy $1,000 worth of Tesla stock, all you have is $1,000. But if I can invest into, say, a multifamily apartment building, I can actually get tax efficiency by getting offset the passive income that it’s paying through bonus depreciation. I get regular predictable passive income checks, and you have an opportunity for upside because you can force value on the back end. So that’s really a multiplier. You’re looking at three different dimensions of how to really grow your wealth. Another example is we actually have an oil and gas fund, and 100 % of that investment is tax deductible against active income. So that’s pretty huge. If you’re a high income earner, you can literally bring down your tax base significantly.
[00:06:11.420] – Sean
100 % you said. Correct. Yeah. Can you give me a little more context? Is that unique to the oil and gas industry? I haven’t heard this before.
[00:06:20.300] – Dave
Yeah. So actually it is. It’s an asset class that’s been around for quite some time. I think it’s had its boons and busts, but it has really evolved. And really since the Reagan era, they’ve had very good tax benefits to that. So we typically think about 80 %… We’re seeing typically 75 % to 80 % of that tax deduction comes in the first year. They call them intangible drilling costs. So all of the costs that go into actually drilling a well. You’ve got operational costs and everything. So just like in a business, you’ve got the well and all of these operational costs that offset that. You also have something called depletion, which is because it’s a finite resource of tapping into the oil and gas that you can actually get a deduction on that because of that depletion. So there’s a couple of different categories on the tax benefits, and that’s what they add up to roughly 100 %.
[00:07:24.240] – Sean
Got you. Okay. And I’m curious here, with this oil and gas fund, what returns are we looking at over the last few years?
[00:07:34.260] – Dave
Yeah. So they’re very strong, Sean. So basically investors are receiving anywhere from a 14 % to 21 % passive income check on a monthly basis. Okay. So that’s just the cash flow distributions. And then we’re looking to exit to either a larger capital player, someone who’s looking to expand their footprint, or maybe someone like a pension fund who will buy these assets. And so we sell those assets and we’re looking at a 3.4 X equity multiple on your return. So that’s within a 3 to 5 year time frame.
[00:08:14.620] – Sean
That’s pretty good. And do you have a minimum investment size? Is it like 50K, 100 K somewhere?
[00:08:20.240] – Dave
Yes. Most private investments are usually 50 to 100 K to get into, correct.
[00:08:25.880] – Sean
Got you. And do you have to be accredited?
[00:08:29.910] – Dave
Yes. These are offerings for accredited investors only.
[00:08:33.700] – Sean
Got it. Okay. And then when somebody wants to invest, do you diversify the investment over some of the funds, like maybe a little bit of the capital is allocated to the oil and gas fund and maybe a little bit to the real estate fund?
[00:08:48.610] – Dave
We’ve done some funds in the past, but typically a fund will be one asset class. So to give you an example, we might have a self storage fund that consists of 10 different properties because those are smaller in value. Otherwise, if we’re doing a real estate, let’s say it’s an apartment building, 300 unit apartment building, everything is just a direct investment into that one.
[00:09:13.120] – Sean
Got it. Okay. And can you give us a list of the different asset classes? Thanks for breaking this down for us here. So you got oil and gas, you’ve got, it sounds like multifamily, you’ve got storage, self storage. What else?
[00:09:28.800] – Dave
Yeah. So I guess before I answer that, again, let me just go back a little bit and talk to you about our investment thesis and why we’re looking at some of these assets. So number one, we’re looking for things that are non correlated to your typical equity indices. And we’re also looking at assets that are at the base layer of Maslow’s hierarchy. So think about shelter, energy, food, water, those type of things that really outlive a recession. And especially at the time of this recording, there’s just so much uncertainty in the market. But I can be sure that from an economic standpoint, it doesn’t even matter what country you’re coming from, the demand for oil and gas products, I don’t care what business you’re in or where you live in the world, but the demand is continually rising. So we want to be on the right side of that equation. So looking at those things that are, what I would say, are recession resilient by them being non correlated to markets, that’s really key as part of our investment thesis. And then we also, like I mentioned earlier, we’re looking at things that are really multiplier with your money in three dimensional.
[00:10:51.640] – Dave
So there’s always a tax efficiency component to it. We’re always looking for passive income, and then we’re looking for that force depreciation. And the passive income. That’s really compelling because we’re in this environment that, again, there’s just a lot of uncertainty with debt markets, the economy, geopolitical risk, and all of these things going on in the world. So how do you insulate yourself? I think that’s really the million dollar question, Sean. How do you insulate yourself? Well, we’re investing in these assets, again, non correlated to the markets, things that people really need, apartment buildings, there’s still a huge shortage in this country. I think about 6 million units right now. So the fundamentals are very strong to this. And then by creating passive income through these private type of offerings, you also create autonomy. So let’s say you lost your job for a period of a couple of months or whatever. Well, wouldn’t it be nice if you knew that you had income from multiple sources coming in to actually support that. And then we also help our clients. This is also another strategy of the ultra wealthy that I’ve been using actually for about 10 years now.
[00:12:14.840] – Dave
And we’re helping our clients with that as well, which is the infinite banking policy. So essentially a cash value, whole life insurance policy. So if that is properly structured, that really solves your liquidity. You can put capital into this. It compounds tax free. You can give it to your heirs tax free. You can create an income stream in a retirement completely tax free. Sometimes people refer to it as the Roth for the wealthy, the type of vehicle.
[00:12:46.180] – Sean
We’ve had others on the podcast that talk about that. Bank on you has been the phrase used a whole life policy. Let’s say it’s 100 grand, and then you take that out, the wealth or the whole life will continue compounding with no money in it anymore. And you can use that capital to invest in other things like real estate.
[00:13:09.770] – Dave
Yeah, exactly. You’ve got this liquidity bucket, you can borrow against it, pay for your kids college, pay for… I mean, this is where you keep your capital reserves fund. If you want six months of living expenses, this is the efficient place to put it. Or let’s say you want to start a new business. I know you have a lot of entrepreneurs and folks on the show. Great place to start to build up capital and it’s being very efficient for you. So going back to our wealth strategy, these are one of the things that we’ve learned is it’s really all about having a comprehensive structure that really compounds and becomes exponential in and of itself. So when we think about stock, particularly, you’re thinking about, okay, this one might be doing a 9 % return and that one’s an 11 % return. But what if I told you that you could reduce your taxes by 10 % every year perpetually. You could get 20 % in a private equity opportunity. You could get two points on top of that by having amplifying your private equity investments by leveraging the infinite banking policy. And you can see all of a sudden how it really becomes a multiplier.
[00:14:23.520] – Sean
Right on. I want to circle back to… This will be the first time somebody’s mentioned this Maslow’s hierarchy of needs. And I just wanted to summarize these real quick. I went to Google, I had to cheat a little bit here, but I think it’d be good for the listener. So at the very base level, you get the psychological needs, you’ve got air, water, food, shelter, sleep, clothing, reproduction. And you mentioned that shelter component, the absolute needs. This is the most important things we need at that base level. And then up from there, we got the safety needs, next level, the triangle, which is personal security, employment, resources, health, and property. So you’re in that territory, it sounds like, at that base level of the triangle.
[00:15:08.400] – Dave
Well, that base level, yeah. And just think about it because, again, with the fundamentals and look at the economics being so short in multifamily units in this country, where are people going to go? Even if the economy gets tough, you have to pay your rent or you’re going to move back in with your parents or move into, I don’t know, a trailer park maybe is one step down. But there’s really not that many options. I think that might be one of the last things to go. And a lot of people don’t realize, actually, in the last recession in 2008, the default rate on multifamily properties was actually less than 1 %. So people were still paying for the rent. And also we just came out of this pandemic as well. So recently, and we saw the same thing. I mean, yes, there were certain markets that there were some people who were affected, especially if you’re in a Class C, lower income type properties, service workers, things like that. They had some impact, but all of our assets have continued to do quite strongly.
[00:16:19.000] – Sean
I want to touch on the returns a little bit. The oil and gas returns were really impressive. 14 to 21 % returns per month.
[00:16:28.960] – Dave
That’s on an annualized basis, but paid monthly.
[00:16:31.730] – Sean
Got it. Okay. So just to be clear, 14 to 21 % per year returns, but you’re being paid something every month.
[00:16:41.060] – Dave
Correct. Got it.
[00:16:42.540] – Sean
Okay. And then this is interesting, too. You can sell it, the investment for about a 3.4 X return. So let’s say your investment is 100 grand, after a few years, you’re turning that into close to 350 grand.
[00:16:57.330] – Dave
Exactly. Between your cash flow distributions and then the sale upon exit. So we’re really compiling a bunch of wells together and then, like I said, selling it to a larger producer or some type of income buyer is the strategy.
[00:17:16.580] – Sean
That’s great. Do you treat your real estate investments in the same way like you invest in a real estate fund with the hopes to sell that property to somebody larger at some point?
[00:17:27.580] – Dave
Yeah, correct. So the essential model, I mean, a lot of people will call it value add or these types of things where similar to what you might do on a single family rental type thing is we’ll purchase an asset. Ideally, you’re getting a great buy from the beginning. S ometimes these might be operated by a mom and pop that don’t have the best technology, all these things. So we take it over, we put in a professional management team, and then we go and start doing renovations. And there’s so much cool stuff, Sean, you can do on the real estate side. You can add a valet trash service and then start charging an additional 50 bucks a month. But you have 300 residents, and let’s say half of those decide to take that. Well, that improves your net operating income on that particular asset. And that’s how commercial real estate assets are valued. So we’ll be able to go in and, like I said, between operational improvements, between doing renovations and improving the property, and then you start to increase the rents. So then when we sell after, it’s typically a three to five year hold period, and then that would be when we sell to return investor profits.
[00:18:45.210] – Sean
Got it. Now, that’s really good expectation. And some of the other real estate, I know you do more than real estate, but some of the other people I’ve had on the show are just real estate focused. They’re at that three, five, seven year timeline where you set expectations with investors that, hey, you’re not going to get your 50 to 100K back. Over this time period, do we want to deliver return to you every month, quarter, or year, and then we want to sell it for a Big Bang event. You get the profits, we get profits as well. Sure. Yeah.
[00:19:17.080] – Dave
And I think some people point out that that’s the one downside to investing in private equity is that you don’t have liquidity to it. Well, I would argue that even on the equities position at some point, do you want to sell right in a down market? You might need access to those funds, but it’s probably liquid if you’re facing a down year like we’re just rolling off of right now. So that’s why we really like that infinite banking policy to create your own liquidity and having your own control. And again, I think this is a really important point, Sean, especially where we are with the cycle and everything. It’s so key to really try to gain some autonomy over your own personal financial situation, your wealth strategy, and putting that into place. Because I spent so many years just being so frustrated by you waking up and looking at CNBC and Bloomberg in the morning and you just see a stream of red and everything might be lined up. You’ve got the best management team in place. You’re in the best sector. Everything is aligned. And then something happens in China that offsets the entire market and takes you down.
[00:20:38.040] – Dave
To me, I just felt like that was such a loss of control to do that. So part of this strategy is regaining some of that control for yourself and creating more predictability in your financial future.
[00:20:52.500] – Sean
Right. That is the challenge. My audience and myself, a lot of us invest in the stock market, and we love investing in individual stocks where you make your big returns. But the downside is you’re not producing that residual or a recurring cash flow. And the benefits, and I’ve mentioned this on the podcast before, I do like real estate investors because their strategy is sound. You’ve got number one, the tax advantage. Number two, the reoccurring revenue stream, and number three, the sale of property. And if you do the renovations and you’ve got the right buyer, you can make a really nice profit at the end zone there.
[00:21:33.010] – Dave
Yeah. I mean, it was really enlightening to me. I know everyone has heard about Robert Kiyosaki, right? But if you recall in his book, The Cashflow Quadrant, right? And it’s got four different quadrants, right? But I wish someone had told me this when I graduated college and I was entering into the world. And as an employee at W2, you’re really paying the most amount in taxes or self employed. However, if you’re a business owner, you can be paying 20 % or less in taxes. And if you’re an investor, you can be paying 0 % in taxes. So once you really get your head around that and then change the paradigm around taxes and how you think about taxes, you can, by partnering with the government, see, that’s what we’re doing in these types of investments. The government wants you to invest in multifamily housing because we need it as a country. They want you to invest in oil and gas because it supports our national defense, our GDP for the country, and everything. So by making some smart moves on the tax side, you can really see some additional benefits on your return side.
[00:22:51.820] – Sean
Smart. And where are your properties located? Just in the US, correct?
[00:22:59.070] – Dave
So that’s a great question, Sean. We haven’t even really talked about that. And most of the properties that we go after are really in the Sun Belt. So the Southeast and the Southwest. And the reason is because you want to be aligned to where the job growth and the population growth is the strongest. So you just go down the Carolinas and see the expansion that’s happening there. Hit Florida and see how much growth and development is going on there. Go over to Texas and Dallas, Austin. Phoenix, Arizona has been a huge hot spot. And then also looking at markets that have diversification in terms of the employment. So you’ve got hospitals, just different industries that make up that. So we don’t get tied to some type of loss like, let’s say, if you were in Vegas, that’s a much more speculative type market.
[00:23:58.840] – Sean
Got it. And then with real estate, are you particular with… Some investors on this podcast have talked about the different classes, whether it’s an A class real estate property or B or C or D. What do you tend to gravitate towards?
[00:24:12.590] – Dave
Yes. Similar to an equities portfolio, our belief is that you don’t want all your eggs in one basket. So you don’t want to have all your exposure to one operator, to one market, or to one asset type like all Class A or all Class C. So we try to provide a mix of opportunities for our investors as they’re building out their portfolios. In this time of 2023, Class A holds up a little bit stronger because you have people who have a little bit more money in their bank account, better paying jobs, things like that. So you have less turnover. Class C or D type properties that are more situated to workforce type housing, they may be more susceptible to recession. But I think depending on your market and just having a variety of these different asset classes makes sense.
[00:25:09.170] – Sean
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[00:26:13.480] – Sean
Again, Tykr. Com. All right, back to the show. If there’s a listener that wants to get involved, how would you answer the question around risk? Because people, obviously, they want to give you… They’re going to write you a check between 50 and 100 grand, I’m assuming in most cases, and they want… There’s no guarantee, 100 % guarantee, but they want to understand how are you mitigating risk?
[00:26:38.280] – Dave
Great question, Sean. And as Warren Buffett always talks about, something is risky if you don’t understand it. So I encourage people to start getting educated, listening to great podcasts like this that are very informative. People can learn how the space of private equity works or getting into syndications, those types of things. And then once you start to learn, I think you actually… And this was the process I went through for over 20 years ago, was learning that some of these assets, the majority of these assets, are actually more asymmetric in nature. So they actually have a lower risk profile than a lot of equity type investing. Because, again, we talked about being in really good markets where there’s big growth, being at the bottom of Maslow’s hierarchy, having non correlation to the markets. So when you start to understand a lot of those things, they really start to stack up and you go, Okay, wow, I’m mitigating my risk here, here, and here. There you go. And so I’m going to take a chance on this. There’s always risk to every type of investment, as we know. There’s even risk putting money in the bank, seems like these days, or bonds.
[00:27:56.310] – Dave
So there’s always some degree of risk. But I think the key takeaway here is get yourself educated, learn more. And nowadays, there’s just so many awesome resources to be able to do that.
[00:28:06.860] – Sean
Sure. How big is your team today?
[00:28:11.020] – Dave
Yeah. So our team, we’ve got about five folks. So right now, mostly doing private equity. We raised almost 30 million last year. So we’ve got several hundred investors, and we’re growing very fast. But it’s all about just trying to create value for investors, trying to help people solve problems. And it’s interesting because I look at wealth building as really creative problem solving. So if it is a liquidity issue, okay, well, what can you do with the liquidity, or here’s a great exercise. There’s so much noise right now in the media outlets and all these things that we’re hearing. And it just puts you in the scarcity mentality. You walk away and you don’t have a great feeling and you just want to just take your pie and just carve up. That’s all you have instead of growing your pie. But if you can get rid of that scarcity mentality and really just focus on what’s in your purview, figure out, okay, well, what is it that’s bothering me that’s causing me to be scared? Is it that I might lose my job? Is it that I don’t have enough runway? Is it that I’m over leveraged, maybe in a particular area?
[00:29:33.560] – Dave
So maybe just try to think through and isolate what is the challenge that I’m really having and figure out what’s certain, what’s uncertain, and then what are the steps that I can do to create some predictability? Or how can I mitigate some of that risk on that scenario? And then you’ll find that you can actually dissect something that’s causing you to feel a lot of strife and then figure out how to push forward.
[00:30:01.820] – Sean
I love the topic of scarcity mindset. And thanks for touching on that because I run into a lot of entrepreneurs and investors, this very limited thought process is the ceiling is only here. And when it should be much, much higher, you just have to have those greater expectations.
[00:30:20.820] – Dave
100 %. I mean, I’ve actually labeled the year 2023 is mindset. That’s my theme for this year, Sean. And again, there’s so much negative noise, news, things going on in the world out there. But I think the people who really have the right mindset, they have an abundant style mindset, and they’re clear, have a lot of clarity in terms of where they’re going and what they’re trying to get to. This is going to be one of the greatest years of opportunity that we’ve seen in a long time. So why not put yourself on the right side of that?
[00:31:00.160] – Sean
I was just listening to CNBC as of the recording of this podcast episode. It’s January 24th, 2023, and CNBC was talking about that. Things could really turn around here in a good way. And there’s a lot of tech stock investors like myself, that’s my industry of knowledge, they could really take off here in the next few months. And we’re starting to see some action with other industries already. For example, the stock market is already in the positive for the new year. We haven’t made up ground from 2022 yet, but we’re on our way. So it’s exciting to see that change. And I think investors need to get excited if you’re interested in something like working with Dave and getting involved in your portfolios, or if you’re investing in the market now is the time to take action.
[00:31:53.120] – Dave
And also, Sean, there’s different ways to make money even in the market or private equity. It’s about creating a really good solid portfolio for what makes sense for you and your family. And if you’re working with a financial advisor, I would strongly start asking questions because the old paradigm of the 60 40 model just does not work anymore with the way bonds are. So why not get some access to private equity? Again, you’ve got more control, things like that, or setting up that infinite banking policy where, again, you’ve got control, you’ve got liquidity, you’ve got tax efficiency, things like that, and making some different allocations.
[00:32:40.760] – Sean
I’ve got two questions here before we get into the rapid fire round. One is around humility. Do you have a story you can share with us, like, maybe a mistake you made or a lesson learned?
[00:32:53.390] – Dave
Wow, that’s a good question. I’m very humble. I’ve made tons of mistakes. In fact, the entire book, it took me so long. It took me 20 years to really get here. And that’s why I’m really passionate about sharing this strategy and all of the mistakes that I made. And since we’re on the topic of investing, here’s one that comes to my mind. Someone asked me on a podcast the other day, what was your worst investment? Well, I come from the tech space as well. So everything is always rainbows and unicorns. And you believe in things. Well, I actually invested in the Indian stock market in about 2000. And there was really a good phase where it was just growing exponentially. But I invested and there was a lot of complexity to the transaction. The asset wasn’t completely papered in my name and things because of international laws and things like that. So I got back a fraction of what I invested in and I became a better investor for it.
[00:34:00.680] – Sean
Yeah. Good lesson learned. Thanks for sharing.
[00:34:02.820] – Dave
[00:34:04.240] – Sean
What is a key takeaway our listeners can apply today?
[00:34:09.960] – Dave
I think the real thing, Sean, is it’s when you talked about risk again. It’s getting educated and really breaking down some of these limiting beliefs and things that we might have from our past by thinking… Here’s a perfect example. 401, everyone, your employer, your parents, your siblings, your spouse, everyone is telling you, Well, I’m going to put everything in a 401. My employer is even giving me a 3 % match. That’s free money, right? Okay, well, I can tell you that about eight years ago, I was asking the question, Is this really the best answer? Because I’m sitting here saying, Okay, if I defer my taxes today, that helps me out this year. But then the one thing I can probably be certain of in the future is that taxes are going to go up. So they’re not telling you about the tax implications at the end of the time when you actually need the capital. So we created a 401 exit calculator for our investors, which actually says that, okay, hey, even if I pay 10 % taxes, the 10 % penalty, I pay the taxes today, but then I reposition that into a private equity asset on an asymmetric basis that can compound uninterrupted tax free over 20 years, the results are pretty staggering.
[00:35:40.800] – Dave
It goes up in the matter of seven figures, depending on your assumptions, versus leaving it in the 401 because, again, a lot of people are not calculating taxes, fees, and inflation in their calculations. I’ll go further, Sean, just to give you this one quick example because I think this will really hit home for a lot of people. So typical financial planning says we build up this nest egg. It’s the accumulation theory. So let’s say you’ve done a good job, you’ve worked, you’ve saved up 4 million for retirement. You’re at 65, then they’re going to say, with the Monte Carlo simulation, you can take out 4 %. It’s actually less than that now, but let’s just go with 4 %. 4 % of… That’s 160K of the 4 million. So you’re now like, Okay, well, my annual wages are 160K, but I’m paying taxes on all that because it’s ordinary income tax rates. So probably in reality, it’s more like 110K. So now you’re living on 110K, and then you start killing your golden goose. Every year, you start dipping down. The 4 million becomes 3.8 % and so on and so forth. Now, if I compare that very simplistically to a 4 million in private equity assets, you have that same 4 million, it’s very reasonable that you could have an 8 % average annual cash flow.
[00:37:14.740] – Dave
That 8 % now is going to give you basically double. So that’s 320K in terms of cash that you have. And all of that should be tax efficient, tax free. So now you actually have double the amount of income. You have no taxes. And by the way, you still have appreciation growth. So next year, you go from 4 million to 4.2 or whatever the numbers are, start to cascade up. And this is truly how people build legacy wealth. And it’s creating something for future generations.
[00:37:52.160] – Sean
Really appreciate you putting the two different strategies back to back there. That is quite impressive. I think there could be a few listeners on this podcast that caught their attention because I know there’s a lot of people with that 401 strategy in place. But yeah, taxes, boy, that’s a big issue there. I love that you pretty much broke it down. You can get double your income when you’re ready to go financially free or retire. Yeah, absolutely.
[00:38:21.300] – Dave
And look, I mean, the reason that you’re not hearing about these strategies from typical financial institutions is because they don’t sell these products. So that’s why you’re not really hearing about them.
[00:38:36.600] – Sean
Right, exactly. All right, well, let’s dive into the rapid fire round. This is the part of the episode where we get to find out who Dave really is. If you can, try to answer each question in 15 seconds or less. You ready? Sure. All right. What is your favorite podcast?
[00:38:53.220] – Dave
My podcast.
[00:38:54.960] – Sean
It’s got to be a different one.
[00:38:59.610] – Dave
Actually, I like 10 X Growth with Joe Polish and Dan Sullivan.
[00:39:04.400] – Sean
Okay, all right. Good. What is a recent book you read and would recommend?
[00:39:11.460] – Dave
One is called What’s In It For Them by Joe Polish. Great book and it’s all about serving other people and trying to give back. Got it.
[00:39:22.520] – Sean
What is your favorite movie?
[00:39:26.850] – Dave
This one is a tough one to call. I’ll say in the past 12 months, one that was great that we brought the whole family to over the holidays was the latest Avatar. And it was really well done. It was impressive.
[00:39:41.060] – Sean
Yeah. And I was looking forward to that for a long time. It’s good to see you come to theaters. Just broke two billion, I think, over this last week. Worldwide gross revenue. Anyway.
[00:39:52.340] – Dave
But I do love Caddy Shack and History of the World. There are some classics out there.
[00:39:58.680] – Sean
Yes. Good choices. All right, we got a few business questions here. What is the worst advice you ever received?
[00:40:08.120] – Dave
Yeah, the worst advice would go back to the investing in the Indian stock market. Okay. that was not a good one.
[00:40:17.160] – Sean
What was the best advice you ever received?
[00:40:21.260] – Dave
Best advice I ever received was really to invest in yourself because you are your greatest asset. So I’ve always received much more than a 10 X return on any investment myself.
[00:40:34.000] – Sean
Great advice. And last question here. If you could go back in time to give your younger self advice, what age would you visit and what would you say?
[00:40:42.900] – Dave
I would go back to age 18, and I would be passing on all of these secrets that I’ve really figured out over these 20 years in my book on this holistic wealth strategy and trying to really understand the meaning. I t’s this psychology of what does wealth really mean to you? Because it means different things to different people. But getting crystal clear on what is your vision and life and then figuring out ways to do it. So we love being able to do that with our kids and our family and with other investors that we work with.
[00:41:23.830] – Sean
Excellent. All right. And where can the audience reach you?
[00:41:27.700] – Dave
Best place, Sean, would be just go to our website at pantheoninvest. Com forward slash wealth hyphen strategy. And you can get a free copy of our eBook on the holistic wealth strategy and then also connect with us. And then we have a podcast as well called Well Strategy Secrets of the Ultra Wealthy. So feel free to reach out.
[00:41:50.840] – Sean
Nice. Well, thank you so much for.
[00:41:52.170] – Dave
Your time. Thank you, Sean. Grateful.
[00:41:54.320] – Sean
All right, we’ll see you. Hey, I’d like to say thank you for checking out this podcast. I know there’s a lot of other podcasts you could be listening to, so thanks for spending some time with me. Also, if you have a moment, could you please head over to Apple podcast and leave a review? The more reviews we get, the more Apple will share this podcast with the world. So thanks for doing that. And last thing, if you do hear any stocks mentioned on this podcast, please keep in mind this podcast is for entertainment purposes only. Please do not make a buyer sell decision based solely on what you hear. All right, thanks for your time. Talk to you later. See you.